Advance planning can help prune your cost of production
The long tail of 2019’s difficult growing season makes the crystal ball blurry for future outlooks — especially inputs. Uncooperative weather, record-high prevent plant acres, tight retailer margins and a late harvest all create volatility for prices in 2020. You should be planning your purchases, says Jim Hedrick, general manager of Sagamore Ag Source, an ag supply consortium. Here are a few strategies to employ.
1. Start the conversation.
Engage with your input providers now, says Samuel Taylor, inputs analyst with Rabo AgriFinance. His forecast calls for lower prices for seed and fertilizer in 2020 and potentially higher prices for some chemicals. If your working capital allows, lock in product as soon as possible, he says, as long as you have the option to return.
“Good communication of your planting intentions for 2020 could offer you some level of safeguard for products and preferential pricing,” Taylor points out.
2. Watch market signals.
The biggest factor to drive the fertilizer outlook will be corn acreage, Hedrick says. “Our outlook is for 2020 fertilizer prices to be down unless we have a spike in corn acres,” he says. “Typically, 91 million to 92 million acres of corn keep fertilizer prices in line.”
3. Price products with multiple suppliers.
Look at a large geographic footprint when pricing 2020 needs, Hedrick says. That could be a 50- or 75-mile radius from your farm. Price at least three different locations.
With fertilizer, he is seeing a wide range in prices across the Corn Belt due to the logistical issues of the past 12 months. If freight is affordable, you could capture big savings by purchasing products from new or different suppliers.
4. Understand your retailer’s business.
“A lot of farmers still view their relationship with a retailer as sacred, but it’s a business,” Hedrick says.
Retailers are trying to compensate for fewer sales due to issues such as large prevent plant acres and farmers doing more of their own field applications. As a result, he says, competition for market share is fierce. Before sitting down with your suppliers, research prices at the wholesale level so you understand the price ranges retailers can offer.
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